Layoff rumors addressed

AM General chief says no decision has been made.

AM General chief says no decision has been made.

MISHAWAKA -- A larger-than-expected order of Humvees could lessen or completely mitigate the impact of a slowdown at AM General's H2 plant here, the company's boss said Friday.

And that could put to rest rumors that more than 100 employees at the plant on McKinley Highway will be out of work soon.

On Wednesday, workers told WSBT-TV they heard layoffs were planned for the H2 plant. At the time, company officials said they had no plans to announce.

AM General's Chief Executive, James Armour, said Friday, however, that his company is looking at many options to respond to less demand for the H2 consumer truck, but said the company will not discuss those options until one has been settled on.

Advertisement

Just hours after the layoff rumors began to spread Wednesday, AM General received a new order for Humvees from the U.S. Department of Defense, Armour said.

The order was about 5,000 trucks larger than the company had anticipated.

That means if labor is cut from the H2 plant, it could be absorbed by the Humvee plant, in an effort to fulfill the increased demand for the military vehicle, Armour said.

"Wednesday morning, I couldn't make that promise," he said. "Wednesday afternoon, I could say, 'Stay tuned.' "

That kind of shift in workers has happened before. In January, the company announced it would move 170 employees off the H2 line and into the Humvee plant, to fulfill military demand.

Whatever the company decides to do at the H2 plant, the announcement won't come for another week or two, Armour said, which would put it right before a planned two-week H2 plant shutdown, scheduled to begin Oct. 16.

The shutdown was ordered by General Motors, which markets and sells the H2.

H2 sales improved slightly from August to September, but are down long-term, said Jesse Toprak, a senior analyst for the automotive Web site Edmunds.com.

In August, GM moved 943 H2 units, he said. In September, the company sold 1,204 units.

In the first nine months of 2006, GM has seen an average H2 sales volume of 1,080 units per month. Two years ago, that number was around 2,100 units per month, Toprak said.

The sagging demand comes at a time when GM is spending more money on incentives for the luxury SUVs.

In September, the company spent $5,254 per unit on incentives for buyers, Toprak said, way up from $3,073 per unit last year.

And inventory is piling up on dealer lots, Toprak said. H2 trucks sold in September 2005 had been on the lot an average of 42 days. Those sold this September were an average of 128 days old.

"If I'm running this model, I will definitely cut production on it," Toprak said of the H2. "That doesn't mean I'm going to cut people."

But until the plan for the H2 plant and its employees is firm, don't expect much talk out of AM General's headquarters in South Bend.

"We just have to be careful. When we have a decision -- when we have information -- we'll tell you," Armour said. "We don't tell you 'what-ifs,' either up or down."

Armour said he can understand the reaction of workers who heard the layoff rumors and shared them with the media as they left work Wednesday.

"We have no problem at all with their reaction," he said. "We wish it had stayed in-house, but it didn't."